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Alleged UBS rogue trader identified

Discussion in 'Finance & Banking' started by Tropo, 20th Sep, 2011.

  1. Tropo

    Tropo Well-Known Member

    17th Aug, 2005
    Alleged UBS rogue trader identified

    Police in London have arrested a suspected rogue trader alleged to have lost Swiss banking giant UBS $US2 billion ($A1.95 billion).
    The 31-year-old UBS trader, Kweku Adoboli, was arrested over the alleged fraud early on Thursday, police said.
    UBS declined to confirm his name and provided little specific information, saying the information was still under investigation and no client money was involved.
    Two minutes before trading began on the Swiss stock exchange, the bank issued a statement that it had "discovered a loss due to unauthorised trading by a trader" in its investment bank.
    Switzerland's largest bank warned it could report a loss for the entire third quarter as a result of the rogue trade, while shares in UBS plummeted 8.7 per cent to 9.98 francs on the Zurich exchange by early afternoon.
    The announcement is a severe blow to the bank's retrieved reputation after the financial crisis which tarnished the standing of Swiss banking, as well as to its profit outlook and puts a question mark over the investment banking division.
    "The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $US2 billion," the bank said.

    The case immediately evoked memories of Jerome Kerviel, the trader at French bank Societe Generale who secretly gambled away 4.9 billion euros ($A6.6 billion).
    The scale of that fraud rocked the global financial industry and prompted banks to tighten oversight rules to ensure such large sums couldn't be traded unnoticed.
    The Swiss banking regulator Finma said it was in contact with UBS about the incident, which was discovered late on Wednesday.
    "From the scale of this case you can be sure that it's the biggest we've ever seen for a Swiss bank," Finma spokesman Tobias Lux told AP.
    The unauthorised transactions could cost UBS almost as much as the 2 billion Swiss francs ($A2.23 billion) that the bank last month said it hoped to save by cutting 3500 jobs over two years.

    It comes as UBS is struggling to restore its reputation after heavy subprime losses during the financial crisis that resulted in a government bailout, and an embarrassing US tax evasion case that blew a hole in Switzerland's storied tradition of banking secrecy.
    When contacted, UBS would not give further details.
    In a statement to its employees, the bank's management said it had uncovered the fraud a day ago.
    "While this news is regrettable, the fundamental strength of our company would not be affected," it said.
    It called on its employees to "concentrate on the clients" saying it "counts to have their support in these uncertain times".

    The bank said it would work tightly with its risk management team and management to find out how the rogue trading could have occurred.
    Adoboli's profile on the professional networking site LinkedIn showed he spent the past five years working at UBS's European Equity Trading division after three years as a trade support analyst for the bank.

    According to Adoboli's former landlord, Philip Octave, he lived in an expensive loft in Shoreditch for several years before moving out about four-and-a-half months ago.
    The area is near London's Brick Lane, a busy street of curry houses, bars and vintage fashion shops only a few blocks from UBS's UK headquarters.

    Octave described Adoboli as a well-dressed quiet man of African origin who "was not the tidiest" of people but very well-spoken.
    He fell behind in the rent twice, but always paid up in the end, Octave said. The rent was a hefty STG4000 ($A6170) per month.

    He said he asked him to move out so he could refurbish the apartment.
    "He was not a party chap," Octave said. "I found no problems."
    Banking observers immediately highlighted the similarities to the Kerviel case, which also involved a trader in his early 30s entrusted with responsibility for vast sums of money.

    The debacle that befell Societe Generale, France's second-largest bank, resulted in Kerviel being convicted in October 2010 on charges of forgery, breach of trust and unauthorised computer use for covering up bets worth nearly 50 billion euros between late 2007 and early 2008.
    He was ordered to pay the bank back all the money he had lost and banned for life from working in the financial industry.

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